LEAP WIRELESS: SHAREHOLDERS SHOULD BACK TAKEOVER BY AT&T

San Diego’s Leap Wireless said this week shareholders should support AT&T’s $1.19 billion takeover bid because Leap was on a slippery slope as a stand-alone company.

On Thursday, the no-contract wireless operator put an exclamation point on that argument by posting a larger-than-expected loss, as its customer base continues to shrink.

The seller of Cricket prepaid wireless service lost $163 million, or $2.09 per share, on revenue of $731 million for the quarter ended June 30. Wall Street analysts on average had predicted a loss of $1.03 per share on revenue of $736 million.

The company also continued to bleed customers, with subscribers falling to 4.8 million, down 18 percent from a year ago.

Leap filed documents with securities regulators Tuesday outlining why its shareholders should vote in favor of AT&T’s takeover offer of $15 a share.

The filing reveals that Leap had been trying to sell itself since 2009, and AT&T showed little interest initially in 2012.

But talks rekindled in May, with AT&T becoming the only company to make an offer for Leap.

In several hours of meetings, Hutcheson and Rachesky emphasized how Leap could jump-start AT&T’s expansion into the no-contract wireless market — which makes up only a small percentage of AT&T’s customers today.

They also pointed to the value of Leap’s spectrum — airwaves that carry voice and data. Finally, Leap has $2.8 billion in net operating loss write offs, a portion of which possibly could be used to cut AT&T’s tax bill.

AT&T increased its offer to $15 a share — an 88 percent premium to Leap’s closing stock price on July 12 when the deal was announced. Leap shareholders also will receive proceeds from the sale of a small block of spectrum in the Chicago area.

An AT&T spokesman said the company was pleased with the price it paid.

Walter Piecyk, an analyst with BTIG Research, thinks AT&T is paying a lot for Leap. He said the tax benefits and spectrum were certainly valuable. But AT&T also may have been willing to pay more to fight back against T-Mobile, which bought Leap rival MetroPCS earlier this year.

In the regulatory filing, Leap said its $3.6 billion debt load and relatively small size made it difficult to compete in today’s hotly competitive wireless market.

It lacked the balance- sheet strength to roll out 4G networks as fast as competitors. Moreover, rivals had larger marketing budgets and distribution networks to lure away customers.

Leap released results Thursday after markets closed. Its shares closed at $16.63 but fell 11 cents to $16.52 in early after-hours trading.